KYIV. Nov 20 (Interfax-Ukraine) - Ukraine should develop a methodology for determining royalties for the use of oil and gas extraction mineral resources but not set them on the basis of political agreements, in particular by making them depend on the national budget deficit, the director of energy programs at Razumkov Centre, Volodymyr Omelchenko, has said.

"In my opinion, only through methodological support will we be able to move away from political influence. While there is no serious model for determining royalties, it will be an element of speculation by politicians and royalties will be constantly reviewed," he said at a press conference at Interfax-Ukraine.

According to the expert, the constant revision of royalties for extraction of natural gas has a negative effect on the image of the country and attracting investors to the oil and gas industry.

"I doubt very much that someone from the politicians in the Verkhovna Rada did some deep calculations to determine that the royalty should be 70% but not, for example, 69% or 55%," he said.

"The unbalanced interest between the industry and tax authorities leads to the fact that our gas industry is in deep degradation, although if the government paid attention to the industry, Ukraine would be able to produce gas at the level to fully provide itself with the resource," Omelchenko said.

Co-chair of the Fund for Energy Strategies Dmytro Marunych said in turn that the current debate on the establishment of royalties revealed different interests within the gas production sector in the form of state gas production, private gas producers, and private companies operating on the basis of joint activity agreements.

"Mining companies work separately, joint activities agreements work separately, and inside there is no common understanding of how to defend the interests of the industry. And the state in the interests of certain political forces, to put it mildly, is trying to kick someone out of the market," he said.

The expert believes that such an approach will have a negative effect on the investment attractiveness of the industry.

"Decisions are made not on the basis of calculations but on the basis of political logic," Marunych added.

Independent expert on energy Valentyn Zemliansky said that the issue of royalties for Ukrgazvydobuvannia today is linked to the issue of establishing gas tariffs for the public, which allows politicians to speculate.

According to him, the establishment of royalties and formation of tariffs for the public should not be linked as it is now, when revenues from the royalties of Ukrgazvydobuvannia are indicated as the main source of budget funds, of which subsidies are paid to the public. As a result, the intended effect for state gas production as a result of the increase in gas tariffs for the public is leveled because of a high rental burden on the company.

Zemliansky also noted that the government is making contradictory decisions in terms of energy saving policy by simultaneously raising gas tariffs for the public and increasing the social norm of gas consumption.

"It's a simple arithmetic, in this case we have the following: if I am a large consumer and I have, let's say, a five-storey house with a swimming pool, I consume more than 2,500 cubic meters and even more than 1,200 cubic meters, while the state in any case will compensate me for this amount," the expert said.

According to him, if a user exceeds the social norm, he should pay for the entire volume of gas used over the top bar and not just what is consumed in excess of the norm.

"Economic interest and an economic incentive for saving appear and then the logic that the rich pay for the poor starts working," he said.